SFO plans hedge fund crime detector

LONDON (Reuters) - The Serious Fraud Office is building a warning system to help it spot hedge fund fraud, the head of the agency said on Wednesday.

"We're looking in particular at a system of red flags to give warnings in respect of hedge funds," Richard Alderman, head of the SFO, told a briefing.

"We want to be able to help the market, as it recovers, in knowing what are the features of hedge funds that can give rise to fraud," Alderman said.

On Friday, Reuters was first to report that the SFO had arrested two men in connection with its investigation into collapsed hedge fund firm Weavering Capital.

The SFO has been learning from U.S. practices in its intelligence gathering, for instance by using a firm's auditors and people who have worked at the firms, a source familiar with the matter said.

(Reporting by Laurence Fletcher; Editing by Toni Reinhold)